Microsoft will invest more than US$500 million in its first major European data center, designed to support applications delivered over the Internet, the company said.
Microsoft said the "mega data center" will be needed to support rising demand for Web-based audio and video applications throughout Europe, the Middle East and Africa.
The center will support services such as its MSN portal and Windows Live, a batch of online services that include Hotmail, photo sharing, blogging and online storage.
Construction on the 550,000 square-foot facility, at Grange Castle Business Park in Dublin, will begin this month and should be completed by mid-2009. The company will spend US$500 million to construct the data center and then more to kit it out with tens of thousands of servers.
Microsoft has been racing against more Web-centric companies like Google and Yahoo to shift some of its business from software applications installed on computers, to services that replicate many of the same functions but are delivered through a Web browser.
To keep up with demand for the services those companies require large data centers, often built in rural areas that have cheap and plentiful electricity.
In July Microsoft opened a similar-sized data center in San Antonio, Texas. Both Microsoft and Yahoo are also building data centers in Quincy, Washington.
Google is also on an aggressive data center building campaign, announcing this year it would build data centers in Lenoir, North Carolina, and Goose Creek, South Carolina, and Council Bluffs, Iowa, at a cost of around US$600 million each.